COVID-19 and changes in global Lean Supply Chains configurations in EU industries: Initial empirical evidence on how European Lean Supply Chains change with the COVID-19 crisis

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Master Thesis International Business and Management

COVID-19 and changes in global Lean Supply Chains

configurations in EU industries: Initial empirical

evidence on how European Lean Supply Chains change

with the COVID-19 crisis

Author: J.R.Eggerding Student Number: S3784843

Supervisor: Professor T.Halaszovich, Jacobs University Bremen. Program: MSc International Business and Management

Key words: COVID-19, Global Supply Chain Strategy, Lean Supply Chains, Disruptions Date: 18-01-2021

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Abstract

The COVID-19 pandemic has severely impacted the ability of international transportation and global trading of goods, limiting the ability of companies to operate internationally. Almost all companies are affected by COVID-19. This research focuses on the impact of COVID-19 on Lean supply chains (LSC) and allows for initial conclusions to be made about what changes might occur in future international supply chain (SC) strategies for industries. Qualitative exploratory research was performed based on eight interviews with supply chain (SC) experts and professionals in Western- European countries of different industries. The hypotheses were created from confronting ideas in current literature about Lean supply

chains, which were structured according to Ketchen and Hults (2007) “competitive priorities”, and COVID-19’s impact according to scientific and news articles. COVID-19’s impact has been experienced differently by companies. The findings show that most have experienced negative effects within their supply chain, however, some of them have experienced limited negative effects or even indirect positive effects. The findings show that the Speed, Cost, Flexibility, Flow of information have been negatively affected, but Quality and Collaboration have not. The main factors causing problems are Variability of supplies and Transportation issues, with limited problems caused by Communication issues. The mechanism of Flexibility has become a larger point of discussion in most of the companies and has increased in

importance. To the knowledge of this researcher, this is one of the first studies into the effect of COVID-19 on international Lean supply chains in European industries. It provides a first look into changing perceptions towards Lean supply chain management. This thesis

contributes to preliminary research about the effects of COVID-19 on future LSCs’

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1. Introduction

As described by Kilpatrick and Barter (2020) as “The black swan event of 2020” (Kilpatrick & Barter, 2020: 1) in the Deloitte Report about Managing supply chain risks and disruptions, the novel COVID-19 virus took the world by surprise in January 2020, and had a major catastrophic effect on the economy and businesses (Kraus et al., 2020; Sarkis et al., 2020). The COVID-19 pandemic spread from its country of origin to over 200 countries around the world and caused unprecedented disruptions in the world’s economy unlike seen before (Craighead, Ketchen, & Darby, 2020; Ivanov, 2020; Sarkis et al., 2020). In response,

governments have taken dramatic measures instituting regulations such as social distancing, lockdowns, closing borders, increased health checks and closing down non-essential

businesses, schools and other institutes (Craighead et al., 2020; Rio-chanona, Mealy, Pichler, Lafond, & Farmer, 2020) in order to curtail the spread and protect the world’s population. In the business world these actions resulted in major disruptions in deliveries of international goods and many sectors as well as entire industries had to suddenly rethink their global business models as international Supply Chains (SCs) stopped moving (Craighead et al., 2020; Kilpatrick & Barter, 2020, Bouman, 2020) and inventories ran out (Weismann, 2020; Lenzen et al., 2020).

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mechanisms to become more resilient (Baker McKenzie, 2020; Jagt, Knipscheer & van Houten, 2020) or the potential of doing nothing (Kraus et al., 2020) are part of this. The consequences of COVID-19 are not yet fully comprehensive as it is ongoing at the moment of research. Yet, researchers can help in discussions as the COVID-19 crisis offers an

opportunity to examine how the current external mechanisms between buyers and suppliers of dominant LSC strategies are configured, and how this configuration of different mechanisms might change as mediated by COVID-19. The impact of COVID-19 pandemic might instill the search for more resilience in LSCs as competitive advantage for industries.

The aim of this paper is to take a quantitative exploratory first look at how the COVID-19 pandemic impacted external LSC mechanisms in EU industries. Suggested is that COVID-19 has a moderating relationship on the dominant LSC configuration, and that certain

mechanisms will change in importance for industries within the EU. A conceptual model of this relationship is located in Appendix 1. The initial focus of this research lies with the short-term. For the general interest any potential long term implications will be asked for as well, however, this will not be part of the official research. Therefore, the main research question is How will the COVID-19 pandemic influence the dominant configuration of Lean Supply Chain mechanisms in industries within the European Union in the short term. The results of this research might lead to an improved discussion and support SC managers in their decision making. By performing research on the impact of the COVID-19 pandemic on the external mechanisms of LSCs in multiple EU industries operating a similar economic environment, an examination can be made on if and how the current configuration of external mechanisms of LSC are affected by COVID-19, and what industries might possibly change moving forward. Examining and analyzing the possible LSC reconfiguration by industries results in

meaningful, generalizable and supported insights, and can potentially help industries which are seeking resilience to avoid similar disruptions in SC as a next pandemic might occur (Craighead et al., 2020).

The research is structured as follows: Firstly, the mechanisms of LSC are collected and examined by using Ketchen and Hults (2007) “competitive priorities” as a structure.

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several countries and the interconnectedness of the participating countries allows for more generalized findings for all the industries. Finally, per mechanism the findings from the interviews are discussed and conclusions are drawn, finalizing together with the limitations and suggestions for future research.

2. Literature review

2.1. Lean Supply Chains

‘Lean’, ‘Lean Management’, ‘Lean Manufacturing’ and ‘Lean Supply Chain Management’ are often used interchangeably, yet concern different types of business activities which containing a similar philosophy: the improvement of said business activity by reducing waste (Arif-Uz-Zaman & Ahsan, 2014; Jasti & Kodali, 2015a; Lamming, 1996; Levy, 1997;

Tortorella et al., 2017). The origins of Lean are based on the Toyota Production System (Jasti & Kodali, 2015b; Levy, 1997) and are a result of scarcity of resources for the Toyota motor corporation as well as strong domestic competition in the Japanese Auto Market. This early idea of Lean included ideas such as Just-In-Time (JIT) Manufacturing and Purchasing, the Kanban method of continuous process improvement, respect for employees autonomy and allowing employees to participate in solving problems and automate proofing against defects and production issues (Hines, Holwe, Rich, Holweg, & Rich, 2004; Martínez-Jurado & Moyano-Fuentes, 2014). Nowadays a Lean strategy is used by many large companies around the world in order to compete with a globalized environment (Brun, Castelli, & Karaosman, 2017; Cagliano et al., 2004; Green, Inman, Birou, & Whitten, 2014; Martínez-Jurado & Moyano-Fuentes, 2014). Previous research showed that Lean implementation in other departments of a company has a beneficial effect for the overall output and can improve overall performance (Cagliano et al., 2004; Lewis, 2000; Marodin, Frank, Tortorella, & Saurin, 2016). Many companies from different industries attempt to adopt Lean management in their operational activities, but with varying success due to improper implementation, a focus on ‘tools’ and materials while neglecting the human side according to research (Hines et al., 2004; Tortorella et al., 2017).

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beyond traditional SCs ideas in order to add value to executing SC strategies (Brun et al., 2017). With LSC the goal is to seek optimization of the production chain and reduce waste in the SC process through the elimination of non-value-adding activities and increasing the amount of value-adding activities (Martínez-Jurado & Moyano-Fuentes, 2014), reducing costs where possible, smaller inventory sizes for more flexible, faster deliveries and production with high quality goods and zero defects (Levy, 1997). This is done through long term commitments with fewer or one supplier(s), strong cooperation with said supplier(s) and systemic improvement along the complete SC to create a highly efficient system, delivering value to the final consumers of the service or product (Arif-Uz-Zaman & Ahsan, 2014; Martínez-Jurado & Moyano-Fuentes, 2014; Tortorella et al., 2017). In Lean, strong

cooperation and information sharing to accomplish joint goals increases the profits of all units in the SC, instead of bargaining, imposing power or seeking alternative suppliers (Jasti & Kodali, 2015a; Tortorella et al., 2017). Furthermore, an additional factor in LSC setups is the type of product or service which is created. This influences the configuration of the LSC as a standardized product could exploit the benefits of a LSC more than an new innovative product, which requires more time to become efficient and needs more agility and short term adjustments and changes (Naim & Gosling, 2010).

2.1.1. Mechanisms

Generally, companies use a certain SC strategy as it would fit their business model best and support them in reaching their goals in the most efficient way (Ketchen & Hult, 2007). This research looks into what LSC mechanisms are beneficial to a company and the different mechanisms required for a company to utilize a LSC strategy. Only the external mechanisms, i.e. factors outside of the buyer or suppliers’ companies, are examined for this research. A crisis in an business environment can be examined from an internal and an external perspective (Kraus et al., 2020), However, the focus of this research lies on LSC which mainly operate between companies. Internal mechanisms of a LSC, i.e. a company’s learning capacity, Just-in-Time capabilities and total SC awareness are not included in this case as the impact of COVID-19 on LSCs is in majority on the external mechanisms outside of the company and is a part of the global business environment.

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management, flexibility and finance (Tortorella et al., 2017). However, in order to organize the external LSC mechanisms, Ketchen and Hult’s (2007) “competitive priorities” of a best value SCs are used as a framework: Speed, Quality, Cost and Flexibility. The four priorities have a connection to a company’s competitive performance in LSC management (Hult, Ketchen, Cavusgil, & Calantone, 2006; Ketchen & Hult, 2007), and each of the priorities can influence outcomes and the focus lays on the total value added by all parts, similar to Lean (Ketchen & Hult, 2007). More importantly, by using Ketchen and Hult’s (2007) competitive priorities of a best value SC as a framework, oversight is given to the relevant external mechanisms. This allows for a focus on a more specific area of SC management without including internal mechanisms present in other models as presented by Tortorella (2017). From the literature review it became clear that most LSC mechanisms can be divided up into beneficial mechanisms, noted in table 1 in appendix 2 as Mechanisms Beneficial (MB), and required mechanisms, noted in the table 2 in appendix 2 as Mechanisms Required (MR). This research uses this distinction as a company can choose to use a LSC for its beneficial

mechanisms in order to reach their goal, but needs to use required mechanisms in order to effectively use a LSC. All of the beneficial mechanisms can be divided into the four

competitive priorities (Ketchen & Hult, 2007). Within these following priorities smaller sub-mechanisms can be found, which allow for more detailed theoretical connection with external influences. Although such sub-mechanisms will be mentioned, however, the focus will remain on the major overarching mechanisms. Contrary to the beneficial mechanisms, the required mechanisms do not have a distinct division in this framework. As the latter are considered mandatory, they do not allow for competitive advantages in the absolute term. The ability to perform the mandatory mechanisms can vary per company, however, they are assumed to not provide a distinct advantage.

2.1.2. Mechanisms descriptions

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et al., 2017). The lead times is said to be dependent on demand predictability in the industry (Kaipa, 2008; Naim & Gosling, 2010), and therefore the speed of an SC depends on the forecasting process of companies, which is needed to manage uncertainty (Kaipa, 2008). High Speed in an SC is therefore a competitive priority but is also connected to the agility of an SC (Agarwal et al., 2006). Having high Speed in an SC makes JIT purchasing also possible, as faster, more frequent deliveries based on forecasted purchasing allow for smaller inventories held by buying units (Jayaram et al., 1999). Low Speed, or long cycle times can have a

negative effect on SC agility as they allow for less short-term changes in response to business’ environmental changes (Kaipa, 2008).

Quality (MB2) refers here to competency in the SC (Green et al., 2014) improvement of the total SC processes or total quality management (Arif-Uz-Zaman & Ahsan, 2014), and/or increased product order delivery reliability and results in buying unit/customer satisfaction (Hult, David J. Ketchen, et al., 2006; Ketchen & Hult, 2007; Marodin et al., 2016). This includes sub-mechanisms concepts such as ‘Design-for-manufacture Production’ or standardization of design (Levy, 1997; Marodin et al., 2016) and Zero Defects (Arif-Uz-Zaman & Ahsan, 2014). The former ensures ease of further manufacturing for the buying unit with improved reliability and service in the design stage of the product (Marodin et al., 2016) and has a strong impact on delivery speeds (Jayaram et al., 1999). The latter concerns the production process itself, where the aim is to deliver high quality products without faults (Arif-Uz-Zaman & Ahsan, 2014). Quality in general reflects the ability of the SC to deliver satisfactory service for the customer, in both quality products as well as on-time (Arif-Uz-Zaman & Ahsan, 2014; Marodin et al., 2016) in order to meet final customer requirements (Carmignani, 2009). When Quality is high, SC runs according to customer requirements and the customer satisfaction is then therefore also high, which result in a competitive advantage (Green et al., 2014). If Quality is low, the product quality as well as the delivery times are unsatisfactory. This results in low customer satisfaction, and a lower competitive advantage (Green et al., 2014).

Cost (MB3) is defined as the cost associated with the order fulfillment (Hult, David J. Ketchen, et al., 2006) and the aim to reduce it (Agarwal et al., 2006). Here the focus lies on creating customer value for the buying units by decreasing costs in SCs to achieve

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is created by an improper flow of information, materials or financial goods (Jasti & Kodali, 2015a). Additionally, cost reduction can be achieved through the sub mechanisms of reducing transportation costs by increasing the transparency of transportation costs (Agarwal et al., 2006). And finally, it can be reduced by the sub-mechanisms of lowering the amount of inventory bought and kept in stock by buying units (Perez, De Castro, Simons, & Gimenez, 2010), similarly to flexible manufacturing, as seen in the Flexibility mechanism (MB4) below. Cost is dependent on the transparency in a SC, as more transparency regarding the costs of SC activities increases the ability to reduce costs (Arif-Uz-Zaman & Ahsan, 2014; Cagliano et al., 2004). With lower Cost, the ability to be competitive becomes higher for both the selling units as well as the buying units (Arif-Uz-Zaman & Ahsan, 2014).

Flexibility (MB4) concerns the responsiveness and the tempo of a SC to a change in the demand of the marketplace or the demands of the SC managers, while also concerning a method to deal with sources of uncertainty, especially in the downstream sections, as well as a method to obtain a competitive advantage in terms of service an SC can offer (Brun et al., 2017; Jüttner & Maklan, 2011; Ketchen & Hult, 2007; Levy, 1997; Tiwari, Tiwari, & Samuel, 2015). It is the ability of an SC to adapt to changes (Brun et al., 2017) and SC Flexibility requires flexibility between all buyers and suppliers in the whole SC and includes the total SC process as well as product or service itself (Tiwari et al., 2015). However, as mentioned by Naim and Gosling (2011), some differences occur in the definition as it pertains to two ideas: Robustness and reactivity to demand (Naim & Gosling, 2010). Most reviewed authors argue that flexibility is mainly reacting to market demands in demand and supply (Agarwal et al., 2006; Arif-Uz-Zaman & Ahsan, 2014; Barnes & Liao, 2012; Brun et al., 2017). However, some use it in the context of dealing with risk events causing changes and dealing with emergencies, focusing more on resilience of the total SC (Brandon-Jones, Squire, Autry, & Petersen, 2014; Jüttner & Maklan, 2011; Scholten & Schilder, 2015).

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inventory sizes, but comes with increased lead times and requires forecasting accuracy (Kaipa, 2008; Levy, 1997; Tiwari et al., 2015). With high Flexibility the readiness to adapt to new risk events is higher according to Jüttner and Maklan (2011), and it is therefore

connected to resilience (Jüttner & Maklan, 2011). Lower Flexibility therefore suggests that changes are not well absorbed, leading to larger negative effects (delays, stoppages) when a crisis occurs (Jüttner & Maklan, 2011).

Moving from the beneficial mechanisms to the required mechanisms, Flow of information (MR1) is defined as a scheduled information flow, which allows for coordination between buyer-supplier and is essential for an efficient LSC according to Tortorella et al. (2017) and has widely shown beneficial effects to SC performance and cost reduction according to Kaipa (2008), Wee and Wu (2009) and Allaoui et al. (2019). It allows for JIT scheduled production, increased transparency, more flexible ordering, and therefore reduced inventory levels in SCs as it connects the buying units demands to the production abilities of the suppliers in greater detail (Allaoui, Guo, & Sarkis, 2019; Narasimhan, Kim, & Tan, 2008; Tortorella et al., 2017). Frequent and fast information sharing by all units in the SC about processes, quality and cost reducing actions among units is required as it provides visibility in the whole SC and reduces SC uncertainty (Kaipa, 2008; Narasimhan et al., 2008). The Flow of information in an SC is mainly mediated by the implementation of information technology (IT) (Agarwal et al., 2006; Zhang, Van Donk, & van der Vaart, 2016). Furthermore, Zhang et al. (2016) argue that the higher usage of ICT between organizations indicates a higher level of information quality within an SC. However, Scholten and Schilder mention that in-person contact in combination with other communication channels as ideal method to resolve SC disruptions (Scholten & Schilder, 2015) as it generates more visibility of the other company or SC unit, and “enabled the recognition of possible disruptions early” (Scholten & Schilder, 2015: 478) High levels of Flow of information lead to more visibility within the SC, and therefore improved the overall SC resilience, while low levels of Flow of information reduces the flexibility and therefore the resilience (Scholten & Schilder, 2015).

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few or one supplier and improving those relationships by acting in the interest of the buyer-supplier relationship instead of seeking diversification (Barnes & Liao, 2012; Perez et al., 2010; Tortorella et al., 2017). This strategy leads to better SC performance and cost reduction (Baker McKenzie, 2020; Barnes & Liao, 2012; Villena, Revilla, & Choi, 2011), and helps improves business processes in reaction to changing conditions in the market or environment (Barnes & Liao, 2012; Villena et al., 2011). According to Perez et al. (2010) Lean requires long term cooperative relationships among all units in the chain (Perez et al., 2010). Poor coordination between SC units can cause dysfunctional operations and negative outcomes such as increased inventory costs, longer lead times, higher transport costs and others (Barnes & Liao, 2012), while collaborative units can contribute to decreasing the aforementioned costs while also adding to SC resilience by increasing visibility and velocity (Scholten & Schilder, 2015). Collaboration is dependent on both in person communication (Scholten & Schilder, 2015) as well as electronic linkages between SC units (Zhang et al., 2016). However, the former also states that a cooperative relationship within a SC depends on accurate and timely information sharing within these electronic linkages, as well as SC integration (Zhang et al., 2016). An overview of all the Mechanisms and related key articles are in table 1 and 2 in appendix 2.

2.2. COVID-19 impact on Lean Supply Chains

The impact of COVID-19 occurred on many different levels of business operations. Research of previous epidemics shown that industries and companies undergo severe negative impacts from the consequences (Kraus et al., 2020), and not a single industry has weathered the COVID-19 pandemic and not felt some direct or indirect effect on their business model (Baker McKenzie, 2020; Kraus et al., 2020; Zhu et al., 2020). During the literature review it became evident that attempting to examine one-on-one causal relationships between the occurrence of the COVID-19 virus, the reactive governmental or company regulations, and the resulting impact on the LSC mechanisms is difficult as the disruptive rippling effects from the demand- as well as supply shocks reshape activity along the entire LSC (Baker McKenzie, 2020), making it harder to find distinct cause-effect relationships. Additionally, many of the following areas of impact are interconnected (i.e. labor shortages are connected with many of the other areas where labor is needed such as transportation, warehousing and

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different industries from multiple different backgrounds wherever possible in order to get a more complete overview. From the literature review the following factors of COVID-19 impact (FC) issues came to light.

2.2.1. FC1: Increased Variability of demand, demand shocks

When COVID-19 initially occurred, it caused a large amount of uncertainty for companies as well as individual consumers in both availability and demand of materials. This caused a shift in consumer and business behavior, as the product type demanded as well as increasing (decreasing) volumes bought changed the predictability of the Variability of the demand. For example, people started to stockpile products such as toilet paper (Craighead et al., 2020) and panic buying basic necessities, i.e. food, water, medicine, while avoiding bigger purchases such as cars (Hobbs, 2020; Mollenkopf, Ozanne, & Stolze, 2020; Zhu et al., 2020). This can translate into less demand from car manufactures as well. Furthermore, As COVID-19 spread globally, continents locked down, including manufacturing plants in both EU and U.S.. This created a drop in input demand with monetary values as high as 147 billion dollars not being spend from a single region (Solleder & Torres Velasquez, 2020). Later in the COVID-19 timeline a large increase in unemployment occurred. ‘Non-essential’ businesses such as restaurants, cafes, bars, sports areas, hotels were mandated by governments worldwide to be closed (Rio-chanona et al., 2020). Additionally, due to closing of restaurants, cafes and bars, food and service demands in those sectors have dropped demand massively as well (Hobbs, 2020). Due to increased unemployment and closing of non-essential businesses, the cash flow from both will drastically decrease indicating declining demands from those sectors. This will also likely change preferences in products to less costly alternatives (Baker McKenzie, 2020; Hobbs, 2020; Kilpatrick & Barter, 2020; The Economist, 2020). For companies operating in certain other sectors, i.e. the Healthcare industry, surge ordering occurred. The equipment orders by medical companies worldwide occurred drastically above predictions, and the increased global demand was unable to be met by suppliers due to an increased strain on global LSCs (Francis, 2020; Zenk, 2020), causing a massive shortage of Personal Protective Equipment (PPE) and other materials worldwide (Burki, 2020). Due to this change in behavior, the Variability of the demand increased, and predicted demand numbers became inaccurate (Hobbs, 2020; Mollenkopf et al., 2020) causing possible LSC issues.

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parts from this location and with limited contingency plans could not continue normal production levels (Baker McKenzie, 2020a). According to Haren and Simchi-Levi (2020) it was predicted that Chinese manufacturing output will remain limited for a long time and that therefore global LSCs in the U.S. and EU will face long term disruptions (Haren & Simchi-Levi, 2020). Additionally, according to Seifert and Markoff (2020), as a response to the aforementioned change in consumer demands as well as uncertain supply availability, the ‘bullwhip effect’ occurred (Seifert & Markoff, 2020). Companies, during times of uncertainty, might falsely increase their supply needs in order to receive a larger amount of a now limited resource, therefore ‘gaming the shortage’ (Zhu et al., 2020) when anticipating shortages (Seifert & Markoff, 2020). Due to the increased Variability in demand and uncertainty the companies face, this effect might further increase the inaccuracies of demand downward through the LSC causing supply shortages (Seifert & Markoff, 2020).

Labor supply shocks or low labor availability that occurred due to COVID-19 also had multiple influences on LSCs as evident in other sections of this literature review, and caused significant disruptions (chanona et al., 2020; The Economist, 2020). According to Rio-Chanona et al., (2020) a labor shortage was caused by important factors such as morality, sickness and avoiding infections (Rio-chanona et al., 2020). Additionally, aspects such as being forbidden to work, being furloughed or caring for family/friends who have been affected by COVID-19 also lowers the total labor availability (Rio-chanona et al., 2020). Furthermore, with lockdown restricting traveling across borders, self-quarantine laws, social-distancing, and the strongly advised working from home regulations, working situations occur with which not all companies are able to comply. Employees who are essential for the

continuation of LSC operations were immobilized, causing global LSCs come to a halt due to the reliance on movement of said employees across borders and overseas (Henriksen &

Selwyn, 2020; Hobbs, 2020; Kilpatrick & Barter, 2020). For example, long haul truckers were unable to move goods to different countries (Hobbs, 2020), and, according to Jagt et al.

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functionality (Kilpatrick & Barter, 2020; Kraus et al., 2020; Mollenkopf et al., 2020; Sarkis et al., 2020; Zenk, 2020). Another example is that Food processing plants were experiencing staff shortages as well as limited operational ability because of extended health measures (Jagt, van Houten, Lestiboudois, 2020). A suggested solution to this problem was to have certain employees obtain the “key worker” or “essential worker” status (Rio-chanona et al., 2020), however, assessment of this proved difficult and companies can take advantage of these regulation (Mcnicholas & Poydock, 2020) and does not solve the issue of employees their unwillingness to work (Henriksen & Selwyn, 2020). Due to the shock in labor supply, the ability of LSCs to operate normally is greatly reduced and increase in errors and delays occur as a result, resulting in supply shortages.

2.2.3. FC3: Transportation issues and new transportation requirements

Transportation of people and goods are an essential part of global LSCs, but as governments responded to COVID-19 with lockdown policies, closing borders and increasing travel restrictions to prevent the spread of COVID-19, SC movement was obstructed (Kilpatrick & Barter, 2020; Zhu et al., 2020). The transportation of goods and people through flights was slowed down significantly as non-essential traveling was halted (Isa, 2020; Rio-chanona et al., 2020; Sarkis et al., 2020; Zhu et al., 2020) and many commercial flights were grounded while travel bans were placed (Henriksen & Selwyn, 2020; Isa, 2020). The suspension of

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additional cleaning measures and increased demand in health regulations caused profound disruptions and slowdowns, making deliveries, especially of materials and products with limited lifespans, difficult (Jagt, van Houten, Lestiboudois, 2020; Mollenkopf et al., 2020; Zenk, 2020). The issues with transportation were exacerbated by the inventory management and delivery strategy contained in LSCs, which focuses on low inventories and JIT

manufacturing (Levy, 1997; Tiwari et al., 2015). From the literature it became evident that many sources question the current focus on LSC strategies. The literature claimed that companies’ search for lower costs in LSC resulted in removal of ‘excess’ inventory and tighter control, emphasizing efficiency, asset utilization and cheapest sourcing (Kilpatrick & Barter, 2020; Mollenkopf et al., 2020; Bouman, 2020). The focus shifted to optimization and the removal of buffers, which removed flexibility to absorb delays or disruptions in the LSC (Kilpatrick & Barter, 2020). Due to this, many companies do not have backup supplies during crisis situations to bridge the shortfall (Weissman, 2020; Lenzen et al., 2020). As industries such as the food industry globalized, they became more concentrated and bottlenecks were created with smaller tolerances for disruptions (The Economist, 2020). This is not a new issue according to the source and solutions such as reversing the efficiency gains in exchange for robustness were suggested in the past (The Economist, 2011). However, the focus on Lean remained and, according to Sarkis et al. (2020), LSCs became more fragile as a result and the current COVID-19 pandemic showed the vulnerability of overreliance on JIT and LSC systems (Sarkis et al., 2020). According to the literature, A response would be to go partially in reverse as a solution, diversifying the sources and obtaining buffers by increasing inventory held (Kilpatrick & Barter, 2020; Bouman, 2020, Saragosa, 2020, Yu, 2020). This would be counter to the philosophy of LSCs. Due to the removal of buffers and usage of JIT delivery, the transportation issues caused by COVID-19 can impact more significantly.

2.2.4. FC4: Communication issues and Information flow disruptions

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Furthermore, multiple sources emphases the importance of maintaining relationships during the COVID-19 pandemic through coordination and collaborative actions, as both buyer and supplier can overcome disruptions and obtain increase resilience together to resolve issues faster (Francis, 2020; Hobbs, 2020; Kilpatrick & Barter, 2020). The most relevant case study of communication issues during COVID-19 was the misallocation of equipment in the US healthcare infrastructure, where medical equipment such as ventilators, PPE and medicine was not distributed clearly between states (Sarkis et al., 2020; Marwaha, Halamka & Brat, 2020). However, this was not a direct buyer-supplier communication issue as the disruptive influence came from governmental agencies.

Nonetheless, a logical argument can be made on how COVID-19 could have negatively impacted the communication abilities within the LSC. Many companies were forced to

digitalize due to COVID-19 in order to stay operational, and the predicted many years of slow adjustments were made within several months (Casado, Sonnemaker & Borden, 2020; Milasi, González-Vázquez & Fernández-Macías, 2020; EAE Business school, 2020; Baig, Hall, Jenkins, Lamarre, & McCarthy, 2020; Blackburn, Laberge, O’toole, & Schneider, 2020). As companies were forced to have employees working from home and traveling to and from other units in an LSC abroad became limited as discussed in the previous section (Isa, 2020; Rio-chanona et al., 2020; Sarkis et al., 2020; Zhu et al., 2020; Henriksen & Selwyn, 2020), it became more difficult to communicate in person and face-to-face. As face-to-face

communications became unavailable, a large shift to virtual mediated communication through computers occurred. Virtual communication, e.g. chat, e-mail and video calling and

conferencing, comes with more challenges compared to in person communication. Virtual communication has a “lack of channel richness” (Klitmøller & Lauring, 2013: 399) compared to face-to-face communication, where the latter allows for a more effective communication with more verbal and non-verbal feedback signs and meta-communication and non-explicit positive and negative confirmations (Klitmøller & Lauring, 2013) and easier coordination within- and solution finding for- LSC disruptions (Scholten & Schilder, 2015). Furthermore, virtual communication does not have the same conversation patterns as face-to-face

communications, which can cause more misinterpretations and disruptions comparatively (Klitmøller & Lauring, 2013). Additionally, the ability to discern non-verbal cues (body language, tone of voice) is limited in a virtual environment, which is important for structuring conversations and maintaining relationships and much important information is lost,

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2008). Regarding text based communications, Klitmøller and Lauring (2013) claim that e-mail communication removes certain personal context and social cues which can lead to communication breakdown (Klitmøller & Lauring, 2013). Next to this, the competence and ability of the employee to effectively use virtual communication is also tested. Not all employees have obtained the same skills to effectively use computer mediated

communications, and more older people were also more likely to be more unequipped to use the internet, which means a difference in communication skills and quality (Lee, Park, & Hwang, 2015; van Deursen, 2020). Additionally, an inequality in access to sufficient internet and phone connections at home during the pandemic was also observed according to Nguyen et al. (2020) and van Deursen (2020). As the ability of employees to use the company’s communication resources became limited due to COVID-19, it became clear that not all people had access to the same channel quality, i.e. a strong internet connection, which became a barrier for online activities as well as work related activities (Lee et al., 2015; Nguyen et al., 2020; van Deursen, 2020). In short, due to COVID-19 the utilization of virtual

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3. Theoretical framework and Hypotheses

Lean Supply Chain Mechanisms

MB1: Speed MB2: Quality MB3: Cost MB4: Flexibility MR1: Flow of information MR2: Collaboration FC1: Variability of demand, demand shocks - X - - - - FC2: Variability of supply, supply and labor supply shocks

X X - X - -

FC3:

Transportation issues and new transportation requirements X X X X X X FC4: Communication issues and Information flow disruptions X X X - X X

Table 3: Theoretical Framework

The literature review enables us to connect the different existing theories and define

hypotheses for this research in the theoretical framework. Table 3 above shows an overview of the theoretical connections made. Green boxes with X’s are assumed to be connected based on literature research and are argued in the subsequent hypothesis sections. White boxes with a dash (“-”) are assumed to be not connected. MB = Mechanisms beneficial (of LSC), MR = Mechanisms required (of LSC), FC = factor COVID-19 or impact of COVID-19 (on LSC). From the above framework we can see 14 connections between literature concepts. These connections will be further elaborated upon in the hypothesis section below.

3.1. COVID-19 factors impact on Speed mechanism

FC2 on MB1: Variability of supply, supply and labor supply shocks on Speed mechanism

As shown by Parsons (2020) as well as by Seifert and Markoff (2020), the increased

Variability in supply due to the COVID-19 was caused by shut down selling units in the most upstream part of the LSC (Parsons, 2020) as well as uncertainty avoiding behavior by

companies trying to secure supplies (Seifert & Markoff, 2020). Next to this, the shortage in labor supply due to COVID-19 (Kilpatrick & Barter, 2020; Rio-chanona, Mealy, Pichler,

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Lafond, & Farmer, 2020; Henriksen & Selwyn, 2020) negatively influenced the ability of LSCs to operate at normal efficiency. Furthermore, the predictability of supplies required was severely disturbed (Zhu, Chou, & Tsai, 2020; Seifert & Markoff, 2020). The Speed

mechanism is dependent on the availability of materials to be delivered (Baker McKenzie, 2020a) on human labor to operate the key parts of an LSC transportation (Kilpatrick & Barter, 2020), and on relative high certainty in predictability (Kaipa, 2008). Therefore, it is expected that the Variability in supply and labor supply shocks caused by COVID-19 (FC2) have a negative effect on the mechanism of Speed (MB1).

FC3 on MB1: Transportation issues and new transportation requirements on Speed mechanism

From the literature review it became clear that COVID-19 had a negative impact on the ability of transportation between buyer and suppliers, due to its direct and indirect negative impact on air transportation (Isa, 2020; Kilpatrick & Barter, 2020; Rio-chanona, Mealy, Pichler, Lafond, & Farmer, 2020; Sarkis, Cohen, Dewick, & Schröder, 2020; Zhu, Chou, & Tsai, 2020; Henriksen & Selwyn, 2020), sea transportation (Zhu et al., 2020; Kilpatrick & Barter, 2020; Saragosa, 2020) and land transportation (Kilpatrick & Barter, 2020). This limited the volume of goods which could be delivered through an LSC through any means, causing significant delays and increased lead times massively. In an LSC, the Speed of the LSC is reliant on exact lead times (Jayaram et al., 1999; Tortorella et al., 2017) to keep inventory low and production flexible. From this, it is expected that the Transportation issues caused by COVID-19 (FC3) have a negative effect on the mechanism of Speed (MB1).

FC4 on MB1: Communication and Information flow issues on Speed mechanism

As COVID-19 forced employees to mass adopt virtual communication channels within a short period of time (Casado, Sonnemaker & Borden, 2020; Milasi, González-Vázquez &

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flow issues caused by COVID-19 (FC4) have a negative effect on the mechanism of Speed (MB1).

From the above, the following hypotheses regarding the Speed Mechanisms are made: First Hypotheses:

H1: Factors COVID-19 FC2, FC3 and FC4 have a negative impact on the Speed mechanism (MB1) of LSCs.

Sub-hypotheses:

H1a: Supply (FC2) and Transportation issues (FC3) have comparatively a strong negative effect on the Speed mechanism (MB1).

H1b: Communication issues (FC4) have comparatively a less strong effect on the Speed mechanism (MB1).

3.2. COVID-19 factors impact on Quality mechanism

FC1 on MB2: Variability of demand, demand shocks on Quality mechanism

COVID-19 caused a radical change in demand as some products increased significantly in demand while others dropped (Craighead et al., 2020; Hobbs, 2020; Mollenkopf et al., 2020; Zhu et al., 2020). As such, the demands of the buying units and final consumers changed as well. As from the literature, LSCs in certain industries were not able to cope with this increased demand (Burki, 2020; Francis, 2020; Zenk, 2020), which can result in the units within and at the final buying end of LSCs being dissatisfied with the total quality of the LSC. Therefore, it is expected that the Variability in demand from the buying units as well as the final consumers as caused by COVID-19 (FC1) have a negative effect on the mechanism of Quality (MB2).

FC2 on MB2: Variability of supplies, supply and labor supply shocks on Quality mechanism

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LSCs were not able to satisfy the buying units and final consumers, therefore decreasing consumer satisfaction. Hence, it is expected that the Variability of supply and labor supply shocks as caused by COVID-19 (FC2) have a negative effect on the mechanism of Quality (MB2).

FC3 on MB2: Transportation issues and new transportation requirements on Quality mechanism

As COVID-19 had a negative influence on the transportation and logistics abilities within a LSC causing delays and stoppages in transportation (Isa, 2020; Kilpatrick & Barter, 2020; Sarkis et al., 2020; Zhu et al., 2020), the delivery reliability decreased (Zhu et al., 2020; Hendriksen & Selwyn, 2020). This most likely decreased the satisfaction of the buying units and final consumers who are reliant on reliable and on time deliveries within an LSC

(Agarwal et al., 2006; Jayaram et al., 1999; Tortorella et al., 2017). As the mechanism of Quality is dependent on the satisfaction of the units within LSC, it is expected that the Transportation issues and new transportation requirements as caused by COVID-19 (FC3) have a negative effect on the mechanism of Quality (MB2).

FC4 on MB2: Communication and Information flow issues on Quality mechanism

Due to COVID-19 virtual communication channels were adopted by companies in a rapid pace (Casado, Sonnemaker & Borden, 2020; Milasi, González-Vázquez & Fernández-Macías, 2020; EAE Business school, 2020; Baig, Hall, Jenkins, Lamarre, & McCarthy, 2020;

Blackburn, Laberge, O’toole, & Schneider, 2020). This increased the challenges faced in regards to coordination of deliveries and detailed information on product requirements (Klitmøller & Lauring, 2013; Devito, 2011; Halverson & Tirmizi, 2008). Due to the challenges in virtual communication with communicating rich information, the products quality might suffer as a result as well as the coordination abilities within the LSC. Therefore, it is expected that the Communication and Information flow issues caused by COVID-19 (FC4) have a negative effect on the mechanism of Quality (MB2). From this, the following hypotheses are made:

Second Hypotheses:

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H2a: Variability in supply (FC2) and Transportation issues (FC3) have a comparatively stronger negative effect on the Quality mechanism (MB2).

H2b: Variability in demand (FC1) and Communication issues (FC4) have a comparatively less strong effect on the Quality Mechanism (MB2).

3.3. COVID-19 factors impact on Cost mechanism

FC3 on MB3: Transportation issues and new transportation requirements on Cost mechanism

As COVID-19 caused disruptions within the transportation of goods and affected the availability of transportation methods (Kilpatrick & Barter, 2020; Rio-chanona, Mealy, Pichler, Lafond, & Farmer, 2020; Sarkis, Cohen, Dewick, & Schröder, 2020; Saragosa, 2020) an improper flow of materials was also caused. An improper flow of materials increases time waste and waste in general (Arif-Uz-Zaman & Ahsan, 2014; Jasti & Kodali, 2015a; Tortorella et al., 2017) which results in an increase in Cost. Furthermore, due to the decrease in available transportation methods the supply of transportation was low while the demand of the still functioning methods increased (Kilpatrick & Barter, 2020; Schork, 2020), which increases the cost of those methods (Schork, 2020). Next to that, the new requirements of transportation regarding safety for the personnel and medical checks and clearances in airports, sea ports and truck bays can also increase the cost and time waste in transportation in an LSC as more delays occur (Kilpatrick & Barter, 2020). Therefore, it is expected that the Transportation issues and new transportation requirements caused by COVID-19 (FC3) have a negative effect on the mechanism of Cost (MB3).

FC4 on MB3: Communication and Information flow issues on Cost mechanism

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Schilder, 2015). As transparency and visibility in the LSC decreased due to the decrease in communication capabilities by the companies in the LSC, the Cost of the LSC will increase. Therefore, it is expected that the Communication and Information flow issues caused by COVID-19 (FC4) have a negative effect on the mechanism of Cost (MB3). From this, the following hypotheses are made:

Third Hypotheses:

H3: Factors COVID-19 FC3 and FC4 have a negative impact on the Cost mechanism (MB3) of LSCs.

Sub- hypotheses:

H3a: Transportation issues (FC3) have comparatively a stronger negative effect on the Cost mechanism (MB3).

H3b: Communication issues (FC4) have comparatively a less strong negative effect on the Cost mechanism (MB3).

3.4. COVID-19 factors impact on Flexibility mechanism

FC2 on MB4: Variability of supplies, supply and labor supply shocks on Flexibility mechanism

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FC3 on MB4: Transportation issues and new transportation requirements on Flexibility mechanism

Literature shows that the Transportation issues caused by COVID-19 were generally affecting the ability of LSC to operate on a normal level (Kilpatrick & Barter, 2020; Zhu et al., 2020). Air, sea and land transportation became limited in their operation ability due to regulations and disruptions (Zhu et al., 2020; Hendriksen & Selwyn, 2020; Schork, 2020) as well as labor shortages in this sector (Kilpatrick & Barter, 2020; Hendriksen & Selwyn, 2020, Hobbs, 2020). Flexibility is dependent on the ability of the operations of an LSC to change in order to deal with either changes in market demand (Brun et al., 2017; Tiwari et al., 2015) or in the business environment (Jüttner & Maklan, 2011). This ability to adjust was severely limited due to the COVID-19 transportation disruption, thus Flexibility in context of being resilience significantly decreased. Then, it is expected that the Transportation issues as caused by COVID-19 (FC3) have a negative effect on the mechanism of Flexibility (MB4). From this, the following hypotheses are made:

Fourth Hypotheses:

H4: Factors COVID-19 FC2 and FC3 have a negative impact on the Flexibility mechanism (MB4) of LSCs.

H4a: Transportation issues (FC3) have a comparatively stronger negative effect on the Flexibility mechanism.

H4b: Variability of supply (FC2) has a comparatively weaker negative effect on the Flexibility mechanism.

H4c: The Flexibility mechanism (MB4) has, comparatively to other mechanisms (MB1, MB2, MB3, MR1, MR2), increased in importance for companies.

3.5. COVID-19 factors impact on Flow of information mechanism

FC3 on MR1: Transportation issues and new transportation requirements on Flow of information mechanism

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communications important communication channels are not utilized, which means that communications will lack richness and quality which are needed to transfer important LSC information about operations, manufacturing procedures, processes and other relevant subjects (Klitmøller & Lauring, 2013; Scholten & Schilder, 2015). Furthermore, this also limits the ability to create visibility within the LSC. Flow of information requires good quality information being transferred in high frequencies in order to support the LSC’ processes and demands (Kaipa, 2008; Narasimhan et al., 2008; Zhang et al., 2016). On that account, it is expected that the Transportation issues and traveling restrictions as caused by COVID-19 (FC3) have a negative effect on the mechanism of Flow of information (MR1).

FC4 on MR1: Communication and Information flow issues on Flow of information mechanism

From the literature review it became clear that COVID-19 caused companies to move to virtual communications within a short amount of time (Casado, Sonnemaker & Borden, 2020; Milasi, González-Vázquez & Fernández-Macías, 2020; EAE Business school, 2020; Baig, Hall, Jenkins, Lamarre, & McCarthy, 2020; Blackburn, Laberge, O’toole, & Schneider, 2020) As traveling became limited, face-to-face meetings lowered (Isa, 2020; Rio-chanona et al., 2020; Sarkis et al., 2020; Zhu et al., 2020). This decreased the communication abilities of units within the LSC to a certain extent, and Communication issues increased due to limited exposure as well as virtual information channels being less ‘rich’ compared to previous used ones (Klitmøller & Lauring, 2013; Devito, 2011; Halverson & Tirmizi, 2008). The

information sharing options decreased, as well as the quality of the information shared (Lee et al., 2015; Nguyen et al., 2020; van Deursen, 2020). Not all of the information flow related activities will be impacted similarly. Some of the ordering abilities will remain intact due to IT technology (Agarwal et al., 2006; Zhang et al., 2016), however, the ability to share rich detailed information regarding the operations and production of materials will likely be decreased (Scholten & Schilder, 2015). Therefore, it is expected that the Communication and Information flow issues as caused by COVID-19 (FC4) have a negative effect on the

mechanism of Flow of information (MR1). From this, the following hypotheses are made: Fifth Hypotheses:

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H5a: Transport issues (FC3) have a comparatively less strong effect on the Flow of information mechanism (MR1)

H5b: Communication issues (FC4) have a comparatively stronger effect on the Flow of information mechanism (MR1)

3.6. COVID-19 factors impact on Collaboration mechanism

FC3 on MR2: Transportation issues and new transportation requirements on Collaboration mechanism

Due to the traveling restrictions caused by COVID-19 (Isa, 2020; Kilpatrick & Barter, 2020; Rio-chanona et al., 2020; Sarkis et al., 2020; Zhu et al., 2020) the ability to have face-to-face meetings with LSC units in other geographical locations was limited. Face-to-face meetings and in person communication is important for relationship building, as more information can be transferred that way through more indirect channels such as body language and intonation, which is more difficult to achieve in virtual communications (Klitmøller & Lauring, 2013; Scholten & Schilder, 2015). Close collaboration with other LSC units as well as joint

management are important in LSCs (Cao & Lumineau, 2015; Jüttner & Maklan, 2011; Perez et al., 2010), and both are dependent on strong coordination abilities and strong production-technical cooperation for advanced material production (Barnes & Liao, 2012). Hence, it is expected that Transportation issues and traveling restrictions as caused by COVID-19 (FC3) have a negative effect on the mechanism of Collaboration (MR2).

FC4 on MR2: Communication and Information flow issues on Collaboration mechanism

As suggested by the literature review, COVID-19 had a negative effect on the quality and capacity of information sharing and communication in LSCs. The move to virtual

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crisis. Therefore, it is expected that the Communication and Information flow issues caused by the COVID-19 crisis (FC4) have a negative effect on the mechanism of Collaboration (MR2). From this, the following hypotheses are made:

Sixth Hypotheses:

H6: Factors COVID-19 FC3 and FC4 have a negative impact on the Collaboration mechanism (MR2) of LSCs.

H6a: Transportation issues (FC3) have a comparatively less strong effect on the Collaboration mechanism (MR2).

H6b: Communication issues (FC4) have a comparatively stronger effect on the Collaboration mechanism (MR2).

4. Methodology

For this research a qualitative method including expert interviews is applied to test the

hypotheses, to learn about the LSC mechanisms configuration in EU industries and how these mechanisms are perceived and valued relative to each other. Qualitative design is suitable to explore relative newer and abstract phenomenon such as the COVID-19 crisis, and analyzing multiple interviews from differing industries will allow for a more robust data set and more generalizable findings (Bluhm, Harman, Lee, & Mitchell, 2011). The framework of

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obtained data. Experts were interviewed as they are key informants in this scenario. They have in general a more practical insight into LSC management and projects, and obtaining practical real world information and how real LSCs operate during this situation can give valuable and rich information for both business research as well as SC managers (Bluhm et al., 2011). It is attempted to gain some genuine insight into the COVID-19 crisis and its effect, as well as in how companies deal with LSC disruptions of this magnitude. This sample contain companies in the food (Alcohol, Seeds, Meat and Dairy products) and construction industry, as well as solar panel production, medical supplies production (PPE, surgical protection equipment) and internet services and products companies. There is a possibility that the industry characteristics have an effect on the relationship between factors and mechanisms, which are also discussed briefly in the findings. Table 4 below shows the interviewees and industry characteristics. The sample contains mostly Dutch experts who are operating in companies with European and worldwide operations i.e. whose operations are in France, Belgium, Netherlands and with LSC links to China, US, France, Germany, Italy and other countries. This can give some insight into the general movement of products from and to industries in Europe. This is both an deductive and an inductive approach (Denis, Lamothe, & Langley, 2001) to create new theories and elaborate on them (Lee, Mitchell, & Sablynski, 1999). Finding hypothesis from the data and testing it using qualitative measures can give insight into potential configuration changes of LSCs and future changes as well.

I1 Foods, alcohol wholesale

I2 Manufacturing and services, Internet services and internet related

products (e.g. Wi-Fi routers, network security)

I3 Construction, housing

I4 Manufacturing, Solar panels (Prototype)

I5 Foods, dairy foods manufacturing

I6 Manufacturing, Medical supplies (PPE, surgical protection

equipment)

I7 Foods, agriculture, seeds, crops

I8 Foods, meat

Table 4. Interviewees and industry characteristics

Data collection

The interviews were conducted between 12-11-2020 and 04-12-2020, while the pandemic was still on going. The interviews are conducted through video calling as there are social

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recorded with the respondents consent, and interviews took between 30 to 60 minutes to complete.

Data analysis

The interviews were transcribed, with the transcription skipped pauses and removed linguistic repetitions and gap fillers (i.e stutters, repeating words, slang, “ehm’s” and “hmm’s”) in order to focus on the core relevant answers. Certain parts have been removed as it contained

personal information or informal talks about subjects irrelevant to this research. And finally, the transcripts were anonymized, and interviewees are referenced by number (I1 to I8). The data obtained was analyzed per hypothesis to discover themes between the different

respondents. The response was ordered per the structure of the hypotheses as seen above in the theoretical framework section.

5. Findings

The analysis of the eight interviews showed that not all of the companies were impacted similarly by the COVID-19 crisis. Additionally, depending on the type of industry, large differences were found between how the companies faired during and after the initial impact, with some interviewees reporting an increase in productivity and profit during this time. During the interviews it became clear that certain aspect from the literature have been hypothesized yet no clear evidence was found, such as “gaming the shortage”, a lack of internet infrastructure and other factors and sub-mechanisms. Transcripts of the interviews are in a separate document, available on request if approved.

5.1. Speed mechanism

Looking at the impact on the Speed mechanism, six out of the eight interviewees (I2, I3, I4, I5, I6, I7) mentioned that the LSC in their business experienced reduced speeds due to the factors discussed in the COVID-19 impact on speed mechanism chapter, but differ in exact lengths of delays. Not all interviewees experienced a significant enough delay to cause a worry or a reaction. Some of the companies experienced very little delays due to, for example, short-term Transportation issues with new borders regulations or a lack of human labor

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in either China, US or Italy, was halted due to COVID-19 for several weeks, causing problems with logistical planning. Secondly, only some interviewees mentioned that the Speed was negatively impacted as communications slowed with certain suppliers (I2, I4, I5), therefore experiencing some slowdown. The Transportation issues seemed to have been less of an problem overall. Most of the affected interviewees stated that the issues occurred within the transportation to and from Europe, while inside Europe the transportation was less or not affected (I3, I5, I7) due to rapid regulation discussions within the EU according to I7. The interviewees who did experience Transportation issues (I5, I6) mentioned the new regulations checks on the materials at customs (I6) and the inability to use standard air

transportation to obtain materials causing problems with the Speed of an SC. As I5 stated: “… And certain products […], we get them produced from a joint venture in America, and there was a real negative impact on the speed with how we could import that because there were much less flights available.” (I5).

Two of the interviewees (I1, I8) did not experience issues with the factors impacting the Speed mechanism. It either did not affect their business model, with the ability to switch to a different supplier easily (I1), or their current set-up of their LSC was resilient enough to not experience a negative impact (I8).

Looking at the sub-hypotheses, I1 and I8 both disagreed with the hypotheses. I3, I5 and I7 disagreed with the hypothesis as the problems were not significant enough according to them, yet did indicate experiencing negative effects from Variability in supply (I3, I5) and

Transportation issues (I5, I7) on the Speed mechanism. I5 also stated that Communication issues and Variability in demand were an issue, but was unable to dissect the exact influence each factor had. Variability of demand was not hypothesized to have an effect, however, some interviewees connected them to this mechanism. I2 and I4 stated that it was mainly Variability in supply and Communication issues, partially confirming H1a and rejecting H1b. I6 was the only one to confirm both H1a and H1b, stating that Variability in supply and Transportation issues were the main factors of the negative impact, and that the negative impact of these two factors was further strengthened by the sudden Variability in demand.

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in the EU giving priority in border regulations with regards to transportation and production as mentioned by I7. A relation may be possible between the industry type and the answers of interviewees to these hypotheses regarding the Speed mechanism.

For the speed mechanism H1a seem to be partially supported since the Variability of supply factor is mentioned several times. The Transportation Issues appeared to have an overall less strong influence. H1b is rejected and the main hypothesis (H1) is partially supported.

5.2. Quality mechanism

The quality of the company’s products and components were overall not affected by COVID-19 according to the interviewees. None of the interviewees reported an increase in defects or rejects. Some interviewees did experience some difficulties with customer dissatisfaction within the LSC, both with their buyers and with their suppliers. I4, I6, and I8 reported a negative shift in customers satisfaction, which was either caused by the Variability in supply in I4 and I6 their cases, and a Variability in demand in case of I6 and I8. I6 stated that “[…]and actually, I think demand I would say, had a very big impact on our quality and our costs.” (I6). I6 and I8 both experienced that the demand of only certain products within their portfolio increased (decreased) rapidly. In I8 their case, there was an overabundance of supplies available due to closures of restaurants and fast food places. This caused their only remaining customer group to demand higher quality products for lower prices.

However, some of the interviewees mentioned that the Quality mechanism of LSC was not affected, even when experiencing some impact (I1, I2, I3). Some reported to actually have improved their LSC processes (I5, I7). The latter group claimed it was due to a renewed ability to focus on their primary processes, with less disruptions caused by new projects, which now have been cancelled due to COVID-19, according to the interviewees.

Looking at the sub-hypotheses, I4, I6 agreed with H2a and H2b. I2 did also agree with both sub-hypotheses, even though I2 did not report a decrease in LSC Quality. I8 disagreed with both H2a and H2b, saying that it was only the Variability in demand that had an impact, the opposite of what is claimed in H2b. The other interviewees disagreed with both hypotheses as none of the mentioned factors had an observable impact on the Quality mechanism (I1, I3, I5, I7).

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production, mentioned that their company experienced negative effects from both Variability in Supply and Variability in demand compared to other companies. This is possible as they are in an industry which was greatly affected by COVID-19’s impact, due to the greatly increased demand in facemasks and the greatly decreased demand for equipment due to the cancellations of surgeries. However, no inferences can be made from this.

Based on these answers, H2, H2a and H2b are rejected.

5.3. Cost mechanism

Some of the interviewees confirmed that that the Costs mechanism of their LSC operations did change and both costs and wastes increased due to COVID-19 (I2, I4, I5, I6). They stated that transportation through sea freight and air transportation increased in costs due to delays or a lack of availability with both transportation methods. I4 stated that “A container went literally from €800 to €1.800 from one moment to the other […] This [container price] just went through the roof.” (I4), when discussing the cost of sea freight from China to Europe. I6 experienced an increase in costs as a part of Transportation issues in a different form as they stated that “Our incoming flows made the whole supply chain a lot slower. So this basically meant that we had to pay a lot of emergent detention costs for the containers.” (I6). I6 also stated that Costs in the LSC increased in combination with the Variability in demand factor, as a sudden drop in demand of specific medical supply products, due to a halt in surgical operations in Europe as a result of COVID-19, meant an overflow in unsold stock which increased the warehousing cost. Only one interviewee, I2, agreed with that Communication issues caused an increase in Costs in an LSC due to planning issues and wasting time in their production. I5 and I6 stated that Communication issues could possibly cause a loss of

potential earnings as no new products could be introduced, however, they disagreed with that it had increased Costs in the LSC.

I1, I3, I7 and I8 did not experience costs increases due to Transportation or Communication issues. I3 and I8 stated that it was due to strong contracting with their transporting partners, and I7 mentioned that their transportation costs were very small. I7 claimed that there was a possibility of an increase in costs due to COVID-19, it was not noticeable within the

company’s bottom line.

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factors had a different effect, and therefore disagreed with both. I6, as seen in a previous quote, also mentions that demand fluctuations increased the transportation costs as well. Looking at the industry characteristics, it seems mostly manufacturing related companies experienced cost increases due to COVID-19 (I2, I4, I6). This is possibly due to

manufacturing materials coming from greater geographical distances in comparison to food products, which allows both transportation issues and communication issues to have a larger effect on costs and waste. There is a possible link, but this remains speculation as companies in food (I5) and construction (I3) industries had opposite experiences, as the former had an increase in cost and the latter had none, even with construction materials indirectly coming from China according to I3.

Based on the answers from the interviews, H3, H3a and H3b are partially supported.

5.4. Flexibility mechanism

Most interviewees agreed with that Flexibility mechanism within their LSC was negatively affected by COVID-19. However, most interviewees assigned this negative effect to Variability in supply. I1, I2, I4, I5, I6, and I8 experienced difficulties with the Flexibility mechanism in their LSC due to Variability in supply. I1, I2, I4, I5, I6 and I8 also disagreed with sub-hypotheses H4a and H4b and claimed the opposite, Variability in supply had a stronger negative effect on the Flexibility mechanism compared to Transportation issues. Only I5 and I6 partially agreed with H4a as Transportation issues did cause difficulties with changes in executing existing supply plans, but still disagreed with it as Variability in supply had a greater effect and that the Variability in supply issues were increased by Transportation issues.

Interestingly, I8 had no issue with flexibility with their output, however, more issues were seen on their input side of the LSC. Due to the nature of their industry and meat production, getting more supplies is relatively easy according to I8, but getting less supplies is more difficult due to working with animals which continue to grow. This indicates a difficulty with scaling down when market demand change. Only I3 and I7 reported experiencing no issues with regards to Flexibility in their LSC. The latter mainly ascribed it to an large supply buffer and the nature of its industry as well as no large change in demand, which according to I7 “it [demand] actually only went up, […], I had my best March ever.” (I7).

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I6, I8). However, not all of the interviewees agreed with H4c for their own company, as it states that the mechanism of Flexibility within their organization has become more important due to COVID-19. This was because, as some of the interviewees replied, within their

organization flexibility was already a major point of concern before COVID-19 occurred (I3, I7) and therefore did not change in importance. I7, although disagreeing with H4c, did explain that due to COVID-19 the company’s management has become much more open to newer ideas such as changes in transportation but also cost saving and waste removal strategies. Additionally, I8 replied that within their organization, flexibility will not be part of future strategies as “…Flexibility, that’s something we cannot do anything about, that’s the nature of the business.”(I8). While I4 acknowledges its importance, yet sees it as part of the long-term as the company is still growing and limited in its ability to execute LSC strategies which involve the Flexibility mechanism. I1, I2, I5 and I6 said that the Flexibility mechanism will be a bigger part of short term changes in the organization.

The characteristics of industries does not seem to have an diverging effect in this case, as most interviewees are in agreement with each other. As aforementioned, there is a difference in reaction which may be assigned to the nature of their industry (I3, I7, I8) or the size of the company (I4). But a clear link between industry characteristics and the answers cannot be delineated.

Based on these answers, H4 is supported, while H4a and H4b are rejected. H4c is supported.

5.5. Flow of information mechanism

The interviewees I2, I4, I5 and I6 agreed with the first hypothesis statement saying that there was a negative impact on the Flow of information between LSC units caused by

Communication issues and Transportation issues factors. Working from home made communication more complex as it was more difficult to perform tasks such as quality management (I5), and more difficult to organize business supply operations (I6). As stated by I5 “The information flow is more difficult because everything has to go through e-mails, teams, and those sorts of channels.” (I5). I2 and I4 explained that the supplying units, their producers, became unreachable for a period of time, especially during the period right after the Chinese new year.

COVID-19 and changes in global Lean Supply Chains configurations in EU industries: Initial empirical evidence on how European Lean Supply Chains change with the COVID-19 crisis